Finance (No. 4) Bill

Sheila Gilmore Excerpts

Thursday 19th April 2012 Commons Chamber

[Ben Gummer]

I thank my hon. Friend for his intervention and for his compliment, because I, too, could be critical of the Government in one respect—[Hon. Members: “ Ah!”] It is not a criticism of the policy. None of us in this place has yet started to be completely straight with people about the enormous scale of the challenge that faces us.

[Sheila Gilmore (Edinburgh East) (Lab)]

rose—

[Ben Gummer]

I will give way to the hon. Lady and then make some progress.

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[Sheila Gilmore]

The hon. Gentleman’s discussion about the issue of old people is interesting, but is it not the purpose of this provision not to provide greater pensions—or, perhaps, better social care—but to balance the cut to the 50% tax rate?

[Ben Gummer]

I wish we could deal with this canard. I did not want to be political about this—[Interruption.] No, I tell the hon. Member for Nottingham East (Chris Leslie) that I did not. Five times more revenue is being taken from the wealthiest people in this country as a result of the Budget than from reducing the top rate of tax. That argument has been dealt with and, although it is pity, I suspect that that is why the hon. Member for Leeds West, who is a serious-minded and intellectual member of the Opposition Front-Bench team, realises that the only way she can make an argument about this issue is by trying to shackle it to a false argument about the top rate of tax, to which it has no relation whatever. This is about beginning to reform provision for people who are retiring in our country. If we do not begin to make these small changes, we will not even be in a position to make the changes that will be necessary in future.

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[Graham Evans]

I am most grateful to my hon. Friend for making that good point, with which I agree. It is a good Budget for working people on basic rate tax.

[Sheila Gilmore]

Does the hon. Gentleman accept that, particularly for families with children, the decreases in tax credits and other benefits more than outweigh the increase in the personal allowance?

[Graham Evans]

As a father of three young children, I realise that we are all in this together, and we need to make those sacrifices. The Government’s maximum benefit cap of £26,000 is all to do with that.

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[Nigel Mills]

The hon. Lady is tempting me to make an even more broad-ranging speech than I had intended, and if I were to talk about such matters, I suspect I might be in danger of being ruled out of order. Let me repeat that there are things that would be nice to have but that are unaffordable in the current situation. Difficult decisions have had to be taken and spending has had to be targeted where it is most needed.

Returning to the topic of the granny tax, I do not feel guilt—that is the wrong word—but I do strongly believe that we need to simplify our tax system. Setting up the OTS is a great measure that this Government have taken, and it has performed the tasks given to it incredibly well. Those of us who advocate tax simplification have to accept that whenever we try to simplify tax, it is likely that some people will win and others will lose out. At a time of budget constraint, there is no way of softening the blow on those who will be losers, so we are left with a choice between muddling on as we are, with a ridiculously complicated and clunky tax system, or trying to simplify it in the hope that in the long run we will end up with a far better system.

[Sheila Gilmore]

rose—

[Nigel Mills]

I have given way many times, so I shall not do so again.

I am not sure that the Government have quite gone down the model line by picking up on the key points made in the OTS report on pensioner taxation. However, if we consider the tax system for pensioners—with higher personal allowances for those over 65 and those over 75, the tapering or claw-back of money depending on how much income they have, as well as all the other different allowances—we can see that the situation is incredibly confusing.

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[The Temporary Chair (Hywel Williams)]

Order. I intend to call the Minister at 4.23 pm, so I ask hon. Members to keep their contributions short.

[Sheila Gilmore]

I am now totally baffled, because the hon. Member for Amber Valley (Nigel Mills) returned to the simplification issue, but what we heard earlier, when he perhaps was not in the Chamber, was an impassioned ex post facto rationalisation for this change given by the hon. Member for Ipswich (Ben Gummer) and, to a lesser extent, by the hon. Member for Stourbridge (Margot James). They sought to assure us that this really was not about simplification, and that it was all part of a master plan to deal with the problems of an ageing population and make the pensions system better for people. So I am now baffled as to which it is. Is it about tax simplification only or is it about a very thoughtful plan, which had not previously been mentioned? This is where I was also puzzled by what the hon. Member for Ipswich said, because nothing of what he said was said by the Chancellor; no obvious rationale on those terms was given by the Chancellor when he introduced this measure in his Budget speech, as he slipped it in as being “simplification”.

This is not part of dealing with the problem of an ageing population; there are other ways of doing that. If the money raised was to be used to help with pensions, it would be a different matter. If it were to be used to help people in my constituency who are struggling with increased care costs and who are not getting assistance with care because they do not meet the extremely high thresholds that are now being imposed, we would have to listen to the suggestion. However, the provision is about finding some extra money to fund the big tax cut that has been given to people with high incomes.

[Richard Harrington]

I am trying to follow the hon. Lady’s rationale and that of her colleagues about this change in the pension arrangements. Their argument is that this money is being used to fund wealthy people through the reduction from 50p to 45p, but would it not be just as logical to say that it is being used to fund the big increase in personal allowances, which benefits everybody?

[Sheila Gilmore]

I think it is important to see this in the context of the cut in the 50p rate.

I am also concerned about some of the attempts today to counterpose and, as usual, level down. It is fascinating. We heard earlier that if we were going to increase the allowances for young people and working people, it was not fair that older people who were already retired should have a higher threshold. Why do the Government always want to level down? Why do they feel, essentially, that they have to pit one group against another rather than saying that the unfairness lies in the high tax levels for working families? Let us not forget that many of those families have not benefited from the rise in the tax threshold because of the changes to tax credits.

Some of the apparently quite small measures that the Government are introducing are illogical. We keep being told that we want people to save and to benefit from savings and work, but yet again this measure undermines that. We have seen that, too, in the way in which working tax credit has been dealt with. We have heard about people with very low working hours who will lose a lot of working tax credit. Working tax credit was frozen, however, and was not increased in line with inflation when benefits were. That totally contradicts the Government’s own policies, because if we want to make work pay rather than benefits, why put up benefits in line with inflation but not working tax credit?

At lot of what is happening is illogical and it is important that we straighten things out and oppose this provision. I shall sit down now so that my hon. Friends can speak.

[Charlie Elphicke]

One key point is missing from this debate, and that is a memory on the part of the Labour party. We have heard a lot of cant from the Opposition and they have shown very little memory of the pensions raid back in 1997, which knocks the issue of age-related allowances into a cocked hat. It should be remembered that there was a £150 billion pension stealth tax at that time. Indeed, Ros Altmann, who was an adviser to Tony Blair, famously said that Labour “destroyed our pensions system”. The numbers involved as regards age-related allowances are small compared with that massive and unjustified smash-and-grab raid on our pension system, which destroyed the private savings culture that had been built up over so many years. Then, considering the insidious introduction of pensions means-testing, which was a massive attack on personal responsibility, it is extraordinary to hear arguments from the Labour party that the measures on age-related allowances somehow take away that personal responsibility, given that it introduced a whole system that systematically wrecked the taking of personal responsibility. We need to hear a bit more humility from the Labour party and a bit more of an apology.